Real estate investors are eyeing opportunities in 2025 with the most optimism that this cohort of buyers has felt in years.
The latest Fall 2024 RCN Capital/CJ Patrick Company Investor Sentiment Index reveals a significant uptick in real estate investor confidence, with an eight-point increase from the previous quarter. Approximately 68% of investors who responded to the survey view the current market as better than a year ago, with 71% anticipating further improvements over the next six months.
These represent the most optimistic responses since the survey’s inception.
“Factors such as declining financing costs, increased home inventory, and slowing but steady home price appreciation are likely contributing to this optimism,” noted RCN Capital CEO Jeffrey Tesch. Challenges remain, though, for real estate investors seeking opportunities as the housing finance industry slowly transitions to a declining rate environment.
Cost Of Financing, Insurance Still Top Concerns
The high cost of financing remains investors’ top concern heading into 2025. Lack of inventory was cited by survey respondents nearly 40% of the time, and rising prices, 36.5%. Competition from investors (43.6%) and homebuyers (32.8%) rounded out the top five biggest challenges.
Competition from large investors is expected to increase, being cited by 46.3% of respondents.
Nonetheless, there is a slight expectation that financing challenges may ease in the coming months, with a 10-point drop in respondents who expect the high cost of financing to remain a top concern six months from now.
Small investor purchase share rose in the first quarter of 2024 after a significant pullback in 2023 from historically high levels of investor activity in 2020-2021. Investor activity rose in the second quarter as inventory increased and competition softened, according to Redfin. A recent CoreLogic analysis shows, however, that June proved a particularly difficult month for investors, with unit volume falling from 112,000 purchases in June 2023 to 80,000 units in June 2024.
Nearly 80% of investors expressed concerns about rising insurance costs and availability, particularly in regions prone to extreme weather events. Insurance woes have impacted flippers more, with 82.9% citing it as a concern compared to 69.4% of rental investors.
The majority of investors who responded believe home price appreciation will continue, though 70.6% of all respondents believe the U.S. is likely to enter a recession in 2025. However, only 38.7% of rental investors believe a recession is likely compared to 74.7% of fix-and-flippers.
Flippers, Rental Investors Split Over Presidential Election
The likelihood of a recession and improved optimism for 2025 correspond closely to real estate investors’ predictions about the outcome of November’s presidential election. Respondents predict a narrow victory for Kamala Harris, favoring her policies over those of Donald Trump when it comes to creating a conducive environment for real estate investing.
“Survey respondents told us that a Harris Administration could create a more robust environment for investing, despite some proposals – like raising the capital gains tax – and policies being pursued by the Biden Harris Administration, such as rent control and limiting tax benefits for owners of 50 or more rental properties, that seem to be inherently anti-investor,” said Rick Sharga, CJ Patrick Company CEO.
The investors surveyed predict a victory for Kamala Harris in November by a fairly wide margin, 51.4% compared to 40.5%. When asked which candidate would create the best environment for real estate investing, respondents cited Harris more often, 47.2% to 39.2%.
The underlying data revealed some rifts between respondents, however.
Investors in California expect a Trump victory in November, flippers by 62.1% to 34.5%, and rental investors by 70% to 30%. Florida investors, meanwhile, are split: flippers expect a Harris victory of 60% vs. 33.3%, while rental investors predict a Trump win of 65% to 30%.
Nationally, flippers appear more confident in Harris creating the better investing environment than Trump by 56.9% to 32.6%. Florida flippers have almost identical expectations — 60% to 33.3% — but California flippers cite Harris by a narrower margin — 50% to 40%.
Rental property investors across the country are more favorable to Trump, with 45% of the respondents saying Trump would create the best investing environment compared to 39.6% for Harris. Only 25% of Florida’s rental investors believe Harris would create the best environment compared to 55% for Trump.
Rental investors from Harris’ home state of California say Trump would create a better environment for investing 75% to 25%. And while rental investors nationally give the election to Harris over Trump by a narrow 50% to 45.5%, Trump is deemed the likely winner by rental investors in both Florida (65% to 30%) and California (70% to 30%).
